Too Big to Fail: Sanders Says "Break These Babies Up"

Sen. Bernie Sanders makes some very good points. Whether you agree with his assessment that the "to big to fail" companies need to be broken up, the point that these companies are costing us all is irrefutable.

More than a year has gone by since Congress passed the $700 billion bailout of Wall Street. The Federal Reserve has committed trillions of additional dollars in virtually zero-interest loans and other assistance to large financial institutions resulting in the largest taxpayer bailout in the history of the world.

President Bush and Ben Bernanke told us we needed to bail out Wall Street because we could not allow big financial institutions and insurance giants to fail because if they failed it would have led to the collapse of the U.S. and global economies.

Today, most of the huge financial institutions still standing have become even bigger — so big that the four largest banks in America (JP Morgan Chase, Bank of America, Wells Fargo, and Citigroup) now issue one out of every two mortgages; two out of three credit cards; and hold $4 out of every $10 in bank deposits in the entire country.

If any of these financial institutions were to get into major trouble again, taxpayers would be on the hook for another massive bailout. We cannot let that happen. We need to do exactly what Teddy Roosevelt did back in the trust-busting days and break up these big banks.

That is why I introduced legislation that would give the Secretary of the Treasury 90 days to identify every single financial institution and insurance company in this country that is too big to fail and to break up those institutions within one year.

If it’s too big to fail, it’s too big to exist.

What's Old Michael Moore Been Up To?

http://www.imdb.com/video/imdb/vi4058448409/

McCain, Palin Call Bank Bailout Not "Socialism"

While beating Barack Obama over the head for saying that increasing taxes for those over $250,000 to allow those earning less to get tax relief(after eight years of paying for the top %5's tax break) is akin to socialism, both John McCain and Sarah Palin refuse to concede that it is more socialistic to hand over $750 to $850 billion in taxpayer dollars to banks, automotive manufacturers, and insurance companies.

"I believe that there are those measures that had to be taken by Congress to shore up not only the housing market but the credit markets -- also to make sure that that's not frozen -- so that our small businesses have opportunities to borrow. And that was the purpose, of course, and that part of the bailout and the shoring of the banks," Palin said. So, to allow small businesses (aka Mom and Pop businesses) to borrow money, we have to make Mom and Pop pay for bailing out the banks they need to borrow money from? I don't know if that is socialism, but it sure is a bizarre form of a free market.

McCain said, "That's the reason why we have governments, to help those who need help, who can't help themselves, and in a time of crisis, to step in and do what's necessary to preserve the lives and futures of innocent people. It wasn't Main Street America that caused this; it was Washington and Wall Street." And yet, it is Main Street that is paying for Wall Street. If it walks like socialism, and talks like socialism, it must be socialism?

The fact is that McCain and Palin represent a viewpoint that says it's okay for the wealthy to get richer by taking it from the rest of us, whereas Obama and others believe its fair to ask the wealthy to pay their share. After eight years of Paul robbing Peter, isn't it time that Pete caught a break?

Surely There is a Place in Hell for People Like This?

According to ABC news:

Shortly after the US government commited $85 billion to bail out AIG, company executives went for a week-long retreat at St. Regis Resort, Monarch Beach, California.

Less than a week after the federal government committed $85 billion to bail out AIG, executives of the giant AIG insurance company headed for a week-long retreat at a luxury resort and spa, the St. Regis Resort in Monarch Beach, California, Congressional investigators revealed today.

"Rooms at this resort can cost over $1,000 a night," Congressman Henry Waxman (D-CA) said this morning as his committee continued its investigation of Wall Street and its CEOs.

AIG documents obtained by Waxman's investigators show the company paid more than $440,000 for the retreat, including nearly $200,000 for rooms, $150,000 for meals and $23,000 in spa charges.

"Their getting their pedicures and their manicures and the American people are paying for that," said Cong. Elijah Cummings (D-MD).

"This unbridled greed," said Cong. Mark Souder (R-IN), "it's an insensitivity to how people are spending our dollars."

The hubris of this company is beyond my comprehension.

Politics: Art of the Passable

The Bailout Bill is proof that there is nothing that happens in Washington that doesn't require lubrication and holding of the nose. This bill, now with $110-150 billion more dollars attached to it, although without the golden parachute for CEO's, places the doling out of our taxes to the very foxes that invaded the hen house. Henry Paulson and his brothers and sisters at Goldman Sachs, JP Morgan, and other such financial capital firms; many of whom will no doubt capitalize on their prior misjudgments (one must replace one's Golden Parachute some how, mustn't one?). Where I come from that is the very definition of crazy--to repeat what has been done before and expecting a different result.

Congress claims that after it failed to pass the bill without the "sweeteners" that their offices were inundated by calls from small business people (e.g., car dealers) who claimed that without the credit crunch being fixed, they would be out of business in a matter of weeks. "Our membership is telling us that there’s either no credit available or it’s so tight it’s not available,” said Bruce Josten, the chief lobbyist for the U.S. Chamber of Commerce. Todd Stottlemyer, president of the National Federation of Independent Business, said the Wall Street bailout was a “bitter pill” for small businesses to swallow, but they know their health and the health of their vendors and suppliers depend on credit being available.

However, if the point is that "easy credit" is one of the things that helped the economy to arrive at this rocky place, shouldn't the legislation address this instead of giving $200,000 to a toy wooden arrow company or $357 million dollars for NASCAR race tracks?

With Congress feeling good that it passed legislation that both D's and R's could live with (never mind the folks on Main Street), next week they plan to start hearings to decide who will shoulder the blame for the crisis--my guess is this will last at least until inauguration day.

In the mean time a board will be formed by the Secretary of the Treasury. Companies that sell mortgages and mortgage-back securities to the government will be required to provide warrants to the government so taxpayers will benefit if the companies’ earnings improve. With limited oversight they will decide whose bad debts the government will buy back and what they're worth. One blogger has an idea of how the bailout will go).

In this respect us Main Street people can relate; it's like pawning your gold wedding ring and getting $100 dollars for it because that's what the pawn shop was willing to give you (The difference here is that your wedding ring has a real value--whatever the market value of gold happens to be--mortgage values are less certain).

Given the experience for taxpayers after the Savings and Loan bailout in the 80's, it will be hard to believe Senators like Judd Gregg, a New Hampshire Republican, who said he thinks taxpayers will come out as winners. “I don’t think we’re going to lose money, myself. We may, it’s possible, but I doubt it in the long run.” In the long run we all end up dead.

Kucinich, the Bailout, and My God, What Are They Thinking

Here is an excerpt of how Dennis Kucinich explains the Bailout Bill that temporarily set back on Monday.

Here is a very quick explanation of the $700 billion bailout within the context of the mechanics of our monetary and banking system:

The taxpayers loan money to the banks. But the taxpayers do not have the money. So we have to borrow it from the banks to give it back to the banks. But the banks do not have the money to loan to the government. So they create it into existence (through a mechanism called fractional reserve) and then loan it to us, at interest, so we can then give it back to them.

Confused?

This is the system. This is the standard mechanism used to expand the money supply on a daily basis not a special one designed only for the "$700 billion" transaction. People will explain this to you in many different ways, but this is what it comes down to.

The banks needed Congress' approval. Of course in this topsy turvy world, it is the banks which set the terms of the money they are borrowing from the taxpayers. And what do we get for this transaction? Long term debt enslavement of our country. We get to pay back to the banks trillions of dollars ($700 billion with compounded interest) and the banks give us their bad debt which they cull from everywhere in the world.

Who could turn down a deal like this? I did.

But what about Bailout Bill-the Return?

CNN Reports:

The bill adds provisions to the House version - including temporarily raising the FDIC insurance cap to $250,000 from $100,000. It says the FDIC may not charge member banks more to cover the increase. But that doesn't prevent the agency from doing so to cover existing concerns with the fund, according to Jaret Seiberg, a financial services analyst at the Stanford Group, a policy research firm.

Instead, the bill allows the FDIC to borrow from the Treasury to cover any losses that might occur as a result of the higher insurance limit.

The bill also adds in three key elements designed to attract House Republican votes - particularly popular tax measures that have garnered bipartisan support.

It would extend a number of renewable energy tax breaks for individuals and businesses, including a deduction for the purchase of solar panels.

The Senate bill would also continue a host of other expiring tax breaks. Among them: the research and development credit for businesses and the credit that allows individuals to deduct state and local sales taxes on their federal returns.

In addition, the bill includes relief from the Alternative Minimum Tax, without which millions of Americans would have to pay the so-called "income tax for the wealthy."

The debate over extending AMT relief is an annual political ritual. It enjoys bipartisan support but deficit hawks on both sides of the aisle contend the cost of providing that relief should be paid for. Others argue it shouldn't be paid for because the AMT was never intended to hit the people the relief provisions would protect. Nevertheless, lawmakers pass the measure every year or two.

The revised bailout bill also includes a "Mental Health Parity" provision, which would require health insurance companies to cover mental illness as it would physical illness.

Are the boys and girls in Congress that attention deficit that they can't stay focused on one problem at a time? These "kitchen sink" bills make voters cringe. The add-ons should stand on their face, not be treated like political chattel to use to pass a bill that doesn't begin to address the distressed homeowner.

Bailout Critiques To Go

Rather than write an entry that is a compilation of another, I figured, heck...send 'em there.

Enjoy the ride and be sure to tip the waitstaff, they're working hard for you.

Who Bailed on the Bailout: How They Voted

The House voted down the hodge-podge bailout bill by a vote of 228 to 205, with one fence sitter. To see what your Congressperson did, see the Bailout vote

How Iowa Representatives went:
Boswell, Loebsack - Aye
Braley, King, Latham - No

The Debt Ceiling and Me: Economic Stabilization Act of 2008

With the debt ceiling likely to be lifted to $11,315,000,000,000 to make room for the $700 billion bailout of the banking and financial markets, it is doubly painful to note that my wife and I will be declaring personal bankruptcy in the near future because some of the same financial giants who were glad to provide credit to us at 30% interest still managed to lose money by making even riskier loans on home mortgages.

To back up a yard, my wife and I are very much responsible for mismanaging our finances, twenty two years of marriage and many immature decisions we made along the way don’t excuse us—although, in defense of us, for the last year we have worked through a debt management plan to pay back what we owe in a reasonable manner—which involved creditors making financial concessions to us that lowered the interest we pay back to between 6 and 9%. I was earning $65,300 a year and my wife was contributing between $12,000 and $15,000 through her art work and childcare. Over half my take home pay was going toward repaying the over $70,000 we had accrued in debt, not counting our home mortgage.

However, in May, I was laid off from my work and was unemployed until mid-September when I accepted a job at $39,000. I used part of our money to payoff some of our debt and now have about $61,000 to settle. Like a country song, our dog needed an operation, our old van died, and we paid cash for two used cars (because I was interviewing for jobs out of town and looked like we would need two cars, if I was commuting).

When I contacted my creditors during my period of unemployment, one of them offered to enroll us in a “hardship” program which would have cost us more than we were paying through our DMP and, when I said it was likely to create a bankruptcy situation, we were told that it didn’t matter to them because they are insured against such things. It puzzled me that they thought so little of their customers that they were willing to hang them out to dry, rather than work with them to get the amount that was due to them.

I was raised to be responsible for my debts—and to the best of my ability; I have tried to repay them. However, when faced with the possibility of also losing our home, if we continue on the path we are on, what choice did my wife and I have?

Some will look at our situation and feel that we are whining—we got ourselves into the situation, why are we complaining? I can only answer that we feel that we are caught between a rock and a hard place. We cannot afford the DMP given our income drop and we haven’t any other options that are reasonable other than bankruptcy. We don’t live extravagantly, we don’t own items that can reasonably payoff our debts—if we did, we’d have sold them to repay our debts (we are selling our second car because my new job is on a bus line and will likely use that to pay an attorney to process the bankruptcy). We have gone through our life savings—the only other resources we have are our retirement funds and we would be penalized tremendously from accessing them and then what? My wife and I are 50 and 53 respectively—15 and 12 years away from “traditional” retirement. There is no reasonable way we can save what people need to save to survive retirement in this day and age.

Again, what would you do, if you were my wife and I?

Frame this against a whole industry that is asking you to bail them out.